Indicators Are Bullsh*t, Do This Instead...

let me open your eyes to some of the biggest lies in trading and what you can do to have the best chance of success as possible now the biggest lie that I see all the time is having an indicator that will just give you a 95% win rate that you can have just something on your chart that just tells you when to sell and when to buy and you'll just print money using that now having a high win rate can be good but the only problem is there's a little more to the picture than just win rate a lot of people come into trading thinking that high win rate means you're profitable that isn't necessarily true I've traded strategies where I had something like an 80% win rate and I was still losing money and the whole reason why is because you need to use risk reward times win rate that's what matters you can't take win rate alone it has to include how much you are risking per trade and how much you're making making per trade let me show you a couple examples so if we take strategy 1 for example and it has a 95% win rate but it has a risk reward of 0.2 and so what this means is you're risking $500 to make $100 and so mathematically you need an 83% win rate to even just break even and so that means you have to be right A lot of the time now even if you have a win rate of 95% doing that you would be profitable but using a strategy like this like I have in the past is generally you're scalping and you're taking a lot of Trades and so commissions come into play fees come into play and when you lose $500 it takes five trades to make up just that one loss and so that messes with you mentally and so that's really hard to deal with and so if we go into strategy 2 here that is a little better of a risk reward ratio and a win rate it only has a 50% win rate but the average risk reward board ratio is two and so that means you're risking $100 to make $200 and so what this does is it makes it so you only need a 33% win rate to break even and so what this does is it takes that pressure off of every trade to succeed because generally with these strategies with the risk award ratio of that first strategy you're usually risking a large amount here to make a small amount and so the market doesn't actually have to move very far your favor to become profitable making it easy to have that high win rate and on the flip side when you have that other trade where you're risking a smaller amount let's say $100 and you're winning $200 every time the market has to move farther in your favor to hit your profit Target and so this makes it so you have that smaller win rate but it doesn't matter about winning every trade it's all about over the long run of consistently being profitable over multiple trades and so both these strategies can work but this is where indicators fail they are not consistent with the information they give you they are always delayed data and so what this means is if we just take a simple moving average right here and so all it does is it calculates basically the average price of the candlesticks and the price movement of what's going on and so basically all you can see is that over time it just moves down and it kind of shows you what the trend of the market is you can see as the market here Trends down it Trends down as well and a very simple strategy would be as the price here breaks the moving average you buy and you bet that the market is going to go higher from there now the only problem with that this data is delayed and so what it ends up looking like is once this Candlestick right here shows that the price broke above it you can see that well maybe I just buy right here but in real time if you've actually ever watched these play out is the moving average might only come up here by the time the price is already up here and so you have basically missed the move and so what happens is you have a delay in what is happening and so there are way more complicated indicators but all of them follow the same thing they're all delayed because they have to wait for the price to happen and instead if you're just watching these candlesticks move and you see a pattern from them that you like you can enter wherever you want and potentially get a way better entry and of course the problem with this is it seems a lot more complicated the idea with following a simple rule of oh if it just breaks the moving average and I buy then I can make money that seems so easy as a beginner and in reality what I've seen over time is it just doesn't work consistently in the long run and there are way better trades to consistently use over time and the thing is if you think about it if there was an indicator that all you had to do was just buy when the market cross a certain indicator or you know two different indicators lined up and said buy well everyone would be making money and there is so much money being pushed into Wall Street and the market there's a ton of insanely smart people they're going to figure that out it's not going to be you know random people like us that are able to find a random indicator that you know someone has made or just is on the stock chart already and able to make some combination with them and have it work out that is not what is going to happen and it's kind of just the sad reality just trading takes time now indicators can work but you have to make a strategy with them and the biggest thing is you need to only use a few because what can happen is if you have 10 different indicators on your chart you're going to get something called analysis paralysis and it's going to just cause you to not know know what to do when you see you know 10 different things line up and you're going to be waiting for 10 different things to line up the problem with trading is you never know what is going to happen and there's always an unknown you're always going into a trade without all the information every trade you jump into you're essentially taking a leap of faith and you have to understand that it's just not going to work out every time that's just how trading is you have to start to approach it with the mindset of long-term focus of I have a strategy that I I am focused on that math is going to play out in the long run that if I have a 50% win rate and I'm risking $100 and I make $200 every time well you're going to be consistently profitable over the long run even though you might lose like three trades in a row and it's going to suck well you then might also win one two or three trades in a row and then your win rate and your risk reward ratio pulls you back to be being profitable now I still think indicators are not the way to trade because of that delayed data there is a better way to approach things that allow you to over the long run get a better understanding and be able to predict what is going on with way more accuracy if you just read the candlesticks and the price movement you will get undelayed Market information it seems a lot more daunting to try and just read basically the candlesticks of the chart and and just you know something else like trading volume but what basically just reading this raw data is it's going to allow you to really understand what's going on that okay as the market moves down here there is signals that are telling you that it's potentially going to bounce and over the long run you aren't going to be relying on something else to tell you what to do the markets change pretty consistently and indicators or any one strategy isn't going to be profitable in every Market condition but what these will do is it will allow you to read what's going on and over time you're going to be able to adjust to the market of what it's doing now it is going to take time and in reality the thing is it's going to take time to succeed you have to set your expectations right of focus in the long term so in my first year of trading with my current strategy I turned my $55,000 starting account into $10,000 in one year and I've had people say wow you only made $5,000 in one year that's really not that much money and this is not the way you want to think about it instead what they don't realize is that this is 100% return in one year and that's what you want to be focused on in trading is percent returns because the money will come in the long run now this is basically my profit graph from that year and you can see it had a lot of ups and downs and this is kind of how trading goes is it's not going to just be some straight up graph where you're consistently making money you're going to have ups and downs and that's just the reality of trading and so here's the thing trading growth is percentage based and so when you're starting out with a small account of let's say $500 even even if you make 100% return in the first year you're still only going to be up to $1,000 in your account now the thing is that's really good percent return think about when it comes to the overall Market big hedge funds they make 20% return in one year and that's amazing and so if you're making something like 100% return in a year that is insane growth and the reason why we have the potential to make these larger returns compared to really big hedge funds is because we are incredibly small trading a really small account size of ,000 $100,000 even a million dollars you can move in and out of the market really really quickly these large head funds they're moving millions or billions of dollars and based on trading volume they can't actually move in and out of the market quickly they have to trade things over a long period of time and so when it comes to your potential growth as a Trader we look at a graph right here with the y- AIS being money and the X AIS being time well when you start at that $500 account well it's going to even if you make $1,000 in the first year or $500 and you get 100% return you know it's not going to be that much money right when you first start out you're going to lose you're going to win it's going to be a struggle and trading's hard when you first start out but eventually over time as you scale percentage wise your account is going to get bigger and bigger and essentially the growth potential becomes exponential because if you have 100% return on a $100,000 account you're making 100K in that one year and so this is where you have to keep your focus on and the thing is this time frame is kind of unknown this could take you this could be one year this could be 2 years this could be 5 years this is all dependent on every person it's going to take you time to do this and deal with just the ups and downs of trading and so the real question is how should you go about trading because indicators really I don't think are a good way to trade and they over complicate things and really are a distraction they come across as something really simple and easy but in reality they don't really work I would say and so you need to find a simple strategy because from my experience of trading multiple strategies and kind of going through this process of struggle and then finding something that works complex never works Market is already so complicated when you really look at it there's infinite possibilities of the market every day is different no chart looks the same and so you have to keep your strategy so incredibly simple that it makes makes dealing with all these other complexities easier because if you have a complex strategy and you deal with the complexity of the market then it's kind of a double whammy and it's just going to make it even harder and so let me quickly walk you through kind of my strategy that I use so you can kind of have an idea of what you can potentially do with just reading candlesticks and so I had a couple times where I kind of just had to scrap what I was doing trading and almost feel like I had to start from Ground Zero and I had to realize okay what seems simple to me and what can I do that I feel confident in and the first thing in that was I felt confident in identifying key areas of support or resistance and so what I did from there was I essentially said okay if I'm only good at identifying support and resistance levels how can I profit off of those and my thought would be okay well that would just be essentially buying off the lows and selling off the highs and focusing on just trading reversals a big issue I had was I would always want to try and capture every move in the market if it was up if it was a reversal if it was a continuation breakout every time you see movement in the market and you're just watching it you feel like you're missing out and you have to get rid of that thought process and realize that you know I realized this over years of kind of struggling and losing money that over the long term if I can just just become profitable with one strategy and one kind of pattern that it's going to work in the long run and I'll actually become profitable and so that's what I did is I started to realize that okay I'm good at identifying support zones and if we go back and think about risk reward ratio I'm a lot more comfortable at risking let's say $100 to make something like $300 or $400 you know staying in that positive risk award ratio where you only need to have something like a 40% % win rate to be consistently profitable over the long run and so that's what I did is I started to focus on okay how can I develop a strategy where I can consistently predict reversals off of these zones and so the first thing in that step is looking for kind of the key zones and so generally all I do is I look at a little bit larger of a time frame that I'm looking at we're currently looking at a one minute chart and these zones I draw off of a 15minute chart and so so this is kind of you can use this on any time frame or Market that's the thing when you're reading candlesticks is all price moves the same between any market and so you could trade crypto Forex stocks options because all these candlesticks they all kind of work the same in all these markets and so essentially for this Zone down here is why I saw the market bounce once bounce twice and you know on another chart on a larger time frame chart there was another bounce a little further back here to essentially draw this Zone and so going forwards the idea is okay as the market comes trending down here into this level how do I then catch the reversal and bet that it's going to go higher and so kind of the step two I realized in this was well you have to wait for this downtrend here to be broken because the market could always just continue trending lower you know you never know what the Market's going to do right it has infinite possibilities and so you have to realize that well these levels aren't going to hold you know nothing in trading is a given just like you can't have any indicator that just tells you exactly where to buy you can't just make a Zone down here and it'll tell you oh yeah the Market's going to bounce here every time and so the first step I realized was well draw a trend line and see when the market breaks that and so I essentially identify the downtrend of the market into this level and start to see when that downtrend starts to slow and so kind of just drawing a trend line off of these couple touches here and then seeing right here well the market clearly breaks this downtrend level with a couple of strong bullish bars and then these red bars you know the the market sold back down making another low here and that's totally okay and so the next thing is step three as kind of the price moves forward is waiting for a Candlestick pattern and so just looking at this Trend here you can start to see it's down and then it starts to go sideways and so when that you can clearly see here the trend is starting to lose that momentum and then another thing I like to look at is these swings of the market here as you can see looking at kind of the highs and the lows is it's making what I like to call a head and shoulders pattern and so right here essentially it's just a bottoming pattern that shows that the market is has made a low here and it's made a lower low and then right here it's actually starting to make the potential of a higher low and so you don't know that's going to happen you know that the chart could keep trending down here but the idea is that I'm sitting here waiting for that to happen and so step four is I'm looking at right here is it's starting to bounce this Candlestick right here is a really bullish Candlestick it essentially shows that the price sold off and then reversed and so I'm using this small micro pattern to essentially confirm that okay this right here is going to potentially start to go up and then so I want to do is I want to enter in buying right here putting my stop down here you know risking something I think on this trade I risked about $150 and from there you managed to trade and so you can see the market just started to bounce there and it went up higher and I made about $550 on this trade essentially closed right right here I moved my stop- loss up essentially and trailed up and got out of the trade and so from there I you know if I was risking $150 $200 here I made about three times my risk and so again this doesn't have to happen every time it doesn't happen every time this trade is from December 2022 and so that's 2 years ago at this point and so this was trading with my smaller $5,000 account and so fast forward to now I'm still trading this strategy it's now 2024 and my size has exploded I am now risking $600 in this trade right here I've actually just upgraded my size again or increased my risks to risking now $800 per trade so I'm going to have even bigger trades in this here soon but the idea is that this is how that growth works I now in this trade I was up $3,700 and that's where the power of just consistently sticking to the same strategy you can see 2 years later I still have the same blue boxes on my chart I'm still basically just looking for a downtrend to come into that level and break and slow and then get in basically at the bottom and ride the swing back higher and it looks the exact same as if we go back to the original one here as this trade right here it's using the exact same pattern that's the thing when it comes to trading is it doesn't need to be complicated to work simple works and then just repeat it all you have to do in trading is just find something that works and just double down triple down and just stay to it that's the hardest part about being successful is sticking to that consistency and so I've started to take this upwards graph and it's been a couple years that's where trading starts to pay off now every year my you know like that first year Year my profit graph for the year is all over the place and that's always going to happen trading always has its ups and downs because you're dealing with probabilities and uncertainty of the market I can have trades like this where it's amazing but I can also have multiple losses in a row and so going forwards you have to stick to something and double down on it don't switch to something because it doesn't work right away and so if you want to learn more about the strategy I have whole tutorials and videos walking through this versus just kind of step by step and how you can start with something like a $500 account and grow it and go through the same process I have check out this video right here it's going to go into way more detail and kind of the growth process and steps that you want to follow going forward

Channel: Riley Coleman

Views: 18,319

Keywords: live day trading futures, day trading strategies, futures trading for beginners, trading strategies, Price action trading strategy, price action trading system, price action trading live, price action trading for beginners, price action trading small account, trading price action, scalping strategy, indicators in stock market, indicators in forex trading, indicators for day trading, indicators for option trading, indicators for crypto trading, indicators tradingview

Id: dHo3TK8BTec

Length: 20min 54sec (1254 seconds)

Published: Sat May 25 2024